Note 12 - Related Party Transactions

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

12

.

Related Party Transactions

Board of Directors and Outside Counsel

A member of the Company’s Board of Directors is a partner at the Company’s outside counsel. During the

three

months ended

March 31, 2020

and

2019

, the Company incurred expenses of $

117,000

 an

d

$113,000,

 re

spectively, related to services provided by the outside counsel. On

March 31, 2020

the Company’s outstanding payables and accrued expenses included an approximate $

78,000

 liability to the outside counsel.

Board of Directors-Consulting Agreement

On

October 13, 2018,

the Company, entered into a consulting agreement with Dr. Eric A. Rose, a member, and former Executive Chairman, of the Company’s Board of Directors. Under the agreement, the consulting services will include assisting the Company on expanded indications for TPOXX® and other business development opportunities as requested by the Company. The term of the agreement is for

two

years, with compensation for such services at an annual rate of 

$200,000.

During the

three

months ended

March 31, 2020

and

2019

, the Company incurred 

$50,000

 related to services under this agreement. As of

March 31, 2020

, the Company’s outstanding payables and accrued expenses included a 

$50,000

 liability associated with this agreement.

Real Estate Leases

On

May 26, 2017,

the Company and MacAndrews & Forbes Incorporated (“M&F”) entered into a

ten

-year Office Lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease

3,200

square feet at

31

East

62

nd

 Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its new corporate headquarters. The Company's rental obligations consist of a fixed rent of

$25,333

per month in the

first

sixty-three

months of the term, subject to a rent abatement for the

first

six

months of the term. From the

first

day of the

sixty-fourth

month of the term through the expiration or earlier termination of the lease, the Company's rental obligations consist of a fixed rent of

$29,333

per month. In addition to the fixed rent, the Company will pay a facility fee in consideration of the landlord making available certain ancillary services, commencing on the

first

anniversary of entry into the lease. The facility fee will be

$3,333

per month for the

second

year of the term and increasing by

five

percent each year thereafter, to

$4,925

per month in the final year of the term.

On

July 31, 2017,

the Company and M&F entered into a Termination of Sublease Agreement (the “Old HQ Sublease Termination Agreement”), pursuant to which the Company and M&F agreed to terminate the sublease dated

January 9, 2013

for

6,676

square feet of rental square footage located at

660

Madison Avenue, Suite

1700,

New York, New York (such sublease being the “Old HQ Sublease” and the location being the “Old HQ”).

Effectiveness of the Old HQ Sublease Termination Agreement was conditioned upon the commencement of a sublease for the Old HQ between M&F and a new subtenant (the “Replacement M&F Sublease”), which occurred on

August 2, 2017.

The Old HQ Sublease Termination Agreement obligates the Company to pay, on a monthly basis, an amount equal to the discrepancy (the “Rent Discrepancy”) between the sum of certain operating expenses and taxes (“Additional Rent”) and fixed rent under the overlease between M&F and the landlord at

660

Madison Avenue and the sum of Additional Rent and fixed rent under the Replacement M&F Sublease. Under the Old HQ Sublease Termination Agreement, the Company and M&F release each other from any liability under the Old HQ Sublease.

Under the Old HQ Sublease, the Company was obligated to pay fixed rent of approximately

$60,000

per month until

August 2018

and approximately

$63,400

per month thereafter until the Old HQ Sublease expiration date of

August 31, 2020.

Additionally, the Company was obligated to pay certain operating expenses and taxes ("Additional Rent"), such Additional Rent being specified in the overlease between M&F and the landlord at

660

Madison Avenue (the "Old HQ Overlease").

Under the Replacement M&F Sublease, the subtenant’s rental obligations were excused for the

first

two

(

2

) months of the lease term (“Rent Concession Period”). Thereafter, the subtenant was obligated to pay fixed rent of 

$36,996

per month for the

first

twelve

(

12

) months, and is obligated to pay 

$37,831

 per month for the next

12

months, and 

$38,665

 per month until the scheduled expiration of the Replacement M&F Sublease on

August 24, 2020.

In addition to fixed rent, the subtenant is also obligated to pay, pursuant to the Replacement M&F Sublease, a portion of the Additional Rent specified in the Old HQ Overlease.

For the time period between

August 2, 2017

and

August 31, 2020 (

the expiration date of the Old HQ Sublease), the Company estimates that it will pay a total of approximately 

$0.9

million combined in fixed rent and additional amounts payable under the New HQ Lease and a total of approximately 

$1.1

million in Rent Discrepancy under the Old HQ Sublease Termination Agreement, for a cumulative total of 

$2.0

million. In contrast, fixed rent and estimated Additional Rent under the Old HQ Sublease, for the aforementioned time period, would have been a total of approximately 

$2.4

million if each of the New HQ Lease, Replacement M&F Sublease and Old HQ Sublease Termination Agreement had

not

been entered into by each of the parties thereto. Because amounts such as operating expenses and taxes

may

vary, the foregoing totals can only be estimated at this time and are subject to change.

As a result of the above-mentioned transactions, the Company discontinued usage of Old HQ in the

third

quarter of

2017.

As such, during the year ended

December 31, 2017

the Company recorded a loss of approximately

$1.1

million in accordance with Accounting Standards Codification (“ASC”)

420,

Exit or Disposal Obligations

. This loss primarily represented the discounted value of estimated Rent Discrepancy payments to occur in the future, and included costs related to the termination of the old HQ Sublease. The Company also wrote-off approximately

$0.1

million of leasehold improvements and furniture and fixtures related to the Old HQ.